Last updateFri, 05 Jun 2020 3pm

Ups and Downs, Ins and Outs

tom-corbettGov. Tom Corbett of Pennsylvania recently signed three key bills for the state's energy sector, one of which updates regulations surrounding the shale gas industry.

Under the natural-gas drilling bill, local governments have the power to levy an impact fee on Marcellus Shale exploration companies, although they are not mandated to do so. The fees would help fund various state and local government programs, including improvement of bridges and water and sewer plants. Some funds could also be used to build affordable housing.

This comes at a time when some producers, hit hard by the low prices, are cutting back on drilling and production of unconventional natural gas. What this will mean for producers and suppliers, including valve, actuator, and control manufacturers, is yet to be seen. If paying these fees makes it economically unfeasible to continue producing in Pennsylvania, will this have a negative effect on the expected increase in valve shipments in 2012? On the other hand, if the fees result in new water and sewer plants being built, those projects requiring valves could add to the number of shipments forecast for 2012.

Speaking of valve forecasts, be sure to check out our Web Feature on Friday as we discuss updated figures from the Valve Manufacturers Association.

chemical plantA second bill has the potential to counter any possible losses that could occur because of the impact fees. In an effort to entice Royal Dutch Shell to build a petrochemical refinery in the Pittsburgh area, legislation was passed which could lure the Netherlands-based oil and gas giant to the Keystone State. Ohio and West Virginia are also candidates to host the plant, so competition has been fierce with representatives from all three states vying for the project.

The ethane to ethylene plant, estimated to cost approximately $1 billion, could provide thousands of job and millions of tax dollars to the state that ultimately ends up winning the project. For areas hard hit by the economic recession, the petrochemical plant is seen as a chance to re-build. The decision is expected sometime in February.

For valve manufacturers and those who supply to them, a win for any state is a win for the industry.


Carbon Credits or Human Rights

shut-down-tar-sandsCrude from oil sands sources were once again under scrutiny as an environmental committee for the European Union considered last week a proposal to label the resource as being worse for climate change than other crude oil. It’s no surprise that Canada officially vigorously opposed the designation, which would have meant that oil sands product would be classified as having a larger carbon footprint, leading essentially to a ban on importing it into the EU.

The committee failed to reach a decision on the proposal which would have deemed that oil extracted from the oil sands emits 22% more greenhouse gas by weight than average for crude oil. The proposal will now go to the Council of the EU. That decision is due in June. It is something that the entire North American oil industry and its attendant supporting industries would do well to monitor.

While the politicians, environmentalists and lobbyists argue over the terminology, few have analyzed exactly how much Canada’s oil sands contribute to CO2 emissions compared to other processes and products. Additionally, while much is made of comparing “carbon footprints”, what is sadly missing in most of these discussions is the ethics of development and production of resources that would have to take the place of Canadian heavy crude.

An excellent point was made by Canada’s Senator Linda Frum of Ontario, who pointed out the amount of press given to a few ducks dying on a tailings pond compared to the “the shockingly common violation of human rights in OPEC countries”. She eloquently pointed out that, especially with regards to discussions about oil and gas production, the press, governments and many people seem to care more about flora and fauna than they do about people.

She says, “One of the chief objections to the oilsands is that they have a slightly higher carbon footprint than some other sources of oil. Not all other sources, mind you. Canadian oilsands oil takes less carbon to produce than heavy oil from Venezuela or California, and even less than oil from Nigeria and Iraq, because of all the natural gas those countries flare.” Why then is the EU’s designation of “larger carbon footprint” not then extended to those sources?

gas flarecroppedCanada’s oil sands is also attacked in the U.S. by activists who have claimed that by bringing it into the country on the proposed Keystone XL pipeline, the environment is put at risk. But here again, the cost to North America’s environment must be balanced against the cost in human life, human rights, and the environment in OPEC countries where the oil must surely originate if relatively environmentally conscientious Canadian producers cannot get their product into the U.S. While Frum was not speaking of the Keystone pipeline, she made an excellent point when she said, “Oilsands critics are engaging in a form of pollution imperialism: they would rather any side-effects from energy production happen in the poor third world, rather than here in Canada – even though we are far better at mitigating that pollution. Not exactly an enlightened viewpoint. I mention this because so few critics of our oilsands do. They would rather point to a pound of CO2 in Canada than a ton of it in China."

ethical-oil-campaignFor American and Canadian oil producers and support industries including valve manufacturers, the EU’s proposal regarding oil sands oil is something to which attention should be paid. In terms of economics, politics and human rights, it has ramifications about which we can only speculate at this time.

Kate Kunkel is Senior Editor of Valve Magazine. Reach her at This email address is being protected from spambots. You need JavaScript enabled to view it.


A Little Sour with the Sweet

houseofrepresentativesJust as the sweet news that a bill that would require approval of its Keystone XL pipeline passed the U.S. House of Representatives last week, TransCanada has run into some sour opposition to the development of the project.

Under H.R. 3408, “The PIONEERS Act”, authority over permitting Keystone XL is transferred from the President to the Federal Energy Regulatory Commission (FERC). The bill also instructs FERC to approve the pipeline within thirty days if the permit remains in compliance with the U.S. State Department’s Final Environmental Impact Statement (FEIS), which concluded that building the pipeline was the preferred option.

fred_upton_official_portrait_111th_congressHouse Energy and Commerce Committee Chairman Fred UptonOf course, legislation still has to make its way through the upper house, but the mood seems hopeful that this legislation will get Keystone XL built sooner rather than later. As House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) was quick to point out, Keystone XL is "a true shovel-ready project that will create tens of thousands of jobs, without costing the taxpayers a dime.” For manufacturers and distributors of valves, actuators and controls, it is certainly a project that could contribute mightily to an even healthier outlook for the industry in 2012.

While TransCanada is doubtless happy about the direction the legislature is taking, the position of some Texas landowners against the efforts of the company to obtain easements for the pipeline is not going over so well. Several landowners along the proposed pipeline route say TransCanada has bullied them into selling their property by using “condemnation proceedings”.

Basically, TransCanada is arguing that Keystone XL would be a “common carrier” pipeline under Texas law. Common carrier in this case is the pipeline equivalent of a public roadway, and easements for public roadways are acquired through eminent domain, if necessary. Trans-Canada says the pipeline meets the common carrier status because it transports oil owned by other companies, with whom it has delivery contracts, and that it is in the public’s best interest because the oil will help the United States meet its demand for energy.

However, opponents say that, to qualify as a common carrier, the pipeline company must agree to transport oil for hire from any company, based on published fees that are regulated by the state, and that TransCanada’s pipeline does not qualify because it will only be oil from Canadian oil sands that is being transported. Basically the argument is that this is a case of a private company using what is supposed to be a tool used only by governments for the public good to generate private profit.

Property owners in a separate case recently took their cause to court when Denbury Resources wanted to build a CO2 pipeline, and tried to use eminent domain to get an easement over a Houston-area farm. In that case, the Texas Supreme Court ruled that Denbury could not take property for private use. This decision is being seen as a test of the ability of private pipeline companies to use eminent domain, and raises the bar of proof. Are pipeline builders acting in the broader interest of the public, or do they meet the criteria for a common carrier?

For the politically charged Keystone XL project, a court case about the use of eminent domain is just about the last thing TransCanada needs.

Share your opinions on this and any other items you feel should be covered by responding to this blog or sending an e-mail to This email address is being protected from spambots. You need JavaScript enabled to view it..


Canada Courting China

pipelineongroundresizedCanada’s Prime Minister, Stephen Harper, made it very clear after the Keystone XL pipeline was rejected by the U.S. that Canada would be seeking other markets for its natural resources. Indeed, he has wasted no time pursuing that goal, and is currently in China, hammering out deals for the country’s natural resources.

The prime minister insists that it is in Canada’s national interest to send oil and gas to Asia and he is therefore looking to sew stronger economic ties with the world’s fastest-growing economy. Harper has repeatedly said that building pipelines such as the proposed Northern Gateway oilsands pipeline to the West Coast is a national priority as Canada looks to ship its energy resources to Asia.

Harper’s trip comes just a few days after the announcement that PetroChina has agreed to take a 20% stake in a Canadian shale gas project in British Columbia owned by Royal Dutch Shell. This is just the latest investment that China has been making in U.S. and Canadian unconventional gas reserves as it seeks to reduce its reliance on dirty coal and oil imports.

What does this mean for America’s energy requirements and for valve and other manufacturers in the Americas? Will there be any mention of China’s notorious rejection of intellectual property and copyrights in Mr. Harper’s negotiations?

harperhandshakechinaSpeculation is rampant about the direction the talks will take, as Harper is in China to sell more than oil. He has indicated in the past that he is anxious to work out a much wider trade scenario that follows a global pattern by government and business to lower barriers to trade world-wide, insisting that expanding Canada’s trade horizons means more markets for Canadian goods and services.

But just as the dream of opening up markets for goods made in America resulted in jobs lost south of the 49th parallel, the lowering of trade barriers has enabled the export of many Canadian jobs to low-wage jurisdictions. North American based valve manufacturers have certainly seen their own fortunes affected by the low cost goods coming from offshore.

Harper seems almost obsessed to direct a good deal of Canada’s energy infrastructure away from the United States, something that has inspired him to call those Canadians who want environmental protection equal to economic opportunity enemies of the state. He is intent on taking advantage of China’s obsession with energy security by adding an oil pipeline to the natural gas line slated for exports to Asia by 2015. While it is true that domestic environmental and social roadblocks have slowed down his aspirations and the Chinese have been impatient about the delays in many pipelines, Harper remains undeterred.

While short term economic gains are possible for North American manufacturers and laborers who would supply and build pipelines to export the oil and gas offshore, long term consequences of increased Canadian energy trade with China are largely unknown. Certainly it will be an economic boon to Canadian producers, but what effect will it have on future energy security for the U.S.?

In the deal with Royal Dutch Shell, Chinese companies will undoubtedly gather much-needed knowledge and experience which can be used to develop the shale gas market in China, where there are huge reserves. What does this exchange of technology mean for valve manufacturers here in North America? What effect will that have on long term employment growth and quality?

While the exploits of Canadian politicians are rarely of interest in the U.S., Stephen Harper’s trip to China is one which should be followed closely.


Mixed Messages

manufactureblogwebOn Jan. 18, 2012, President Obama notified Canada’s Prime Minister Stephen Harper that he was rejecting the Keystone Pipeline. While he did say that he was not closing the door on the project, political hay has nevertheless been made by his opposition because the rejection of the pipeline means thousands of lost jobs for Americans.

Trans Canada contends that Keystone XL could yield 20,000 new jobs, 7,000 of those in manufacturing. No doubt many of those would be in the manufacture of valves and related materials, definitely a boon to the valve industry in the Americas. In the past, Trans Canada has also cited a 2010 study that found the project would have supported nearly 99,000 induced and indirect jobs, but in September 2011, one of the unions supporting the project predicted that, over four years, Keystone XL would create nearly three times the direct and indirect jobs that TransCanada claims.

In an economy where good manufacturing jobs are hard to come by, the decision to squash the pipeline does seem to be counterproductive to the stated goal of jobs creation.

However, a week later, in his State of the Union address, the President laid out what he is calling a “Blueprint for an America Built to Last,” encouraging companies to create manufacturing jobs in the United States while removing deductions for shipping jobs overseas and encouraging insourcing. He is offering a domestic production incentive for manufacturers who create jobs in the U.S. and doubling the deduction for advanced manufacturing. He is proposing to reform the current deduction for domestic production by more narrowly focusing it on manufacturing activities—for example, it would no longer cover oil production.

In that address, Obama indicated there would no longer be incentives to oil companies, but he did say the administration would take every possible action to safely develop the energy from natural gas, production of which could support more than 600,000 jobs by the end of the decade. In this instance, of course, many of those jobs would be in the manufacture and distribution of valves and related materials.

So the government giveth and the government taketh away. Hydraulic fracturing and production of unconventional natural gas requires the use of up to 2,000 valves for each wellhead, so the President’s statement that he would encourage responsible natural gas production is good news for manufacturers, but pipelines also utilize hundreds of valves, and at least for now, the Keystone Pipeline will not be using any. Tax breaks were announced that give U.S. valve manufacturers even more incentive to bring their production back onshore, but if oil companies would no longer receive subsidies and incentives, will there be repercussions to the industry?

With mixed messages coming from the White House, it is more important than ever to be vigilant. A lengthier report on how the 2012 State of the Union address impacts the valve industry will be the Web Feature on the ValveMagazine.com website later this week. Share your news and opinions on this and any other stories you feel should be covered by responding to this blog or sending an e-mail to This email address is being protected from spambots. You need JavaScript enabled to view it..

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